The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

If You’re Going To Keep Score, At Least Get It Right!

On February 21st, 2012, posted in: Uncategorized by 1 Comment

Apparently, Joe Stieven has gotten caught up in the “nastiness” of the political season that has taken the airwaves hostage. He is in full-swing this election year by slinging his own bucket full of mud. His target is credit unions. As is usually the case with those who choose to toss mud balls, Joe is misinformed and, as a result, he has missed his target.

As best I can tell, Mr. Stieven is an investment banker who sponsors a hedge fund. (On a continuum of the financial services industry, you can’t get much farther away from what Mr. Stieven does for a living and what credit unions do.) Nevertheless, he intimates his expertise (or lack thereof) on credit union-related matters by voicing his comments in a recent St. Louis Business Journal article. He remarked of his great concern over the bailout of credit unions. He is especially frazzled over the fact that credit unions received a bailout, even though we don’t pay federal taxes.

Please call Mr. Stieven if you know him. Here is the truth. For the record, credit unions did NOT receive a bailout from the federal government like that of banks, the auto industry or AIG. What Mr. Stieven failed to research is that the credit union insurer, NCUA, received an increase in their borrowing authority from $6 billion to $30 billion. Let’s emphasize for the purpose of clarity: we didn’t get $30 billion from the government; we received access to borrow $30 billion – quite a difference, don’t you think? This increase in borrowing authority, if needed, would allow for the NCUA to stabilize the credit union share insurance fund because of losses related to the failure of investments that contained mortgage-backed securities. Retail credit unions use corporate credit unions as our financial institutions, and many of these corporate credit unions across the country experienced such losses. So, the increased borrowing power did, in fact, come into play.

Now, had Mr. Stieven done his homework, he would have realized that NCUA has accessed the Treasury to BORROW money and, in the spirit of BORROWING money, has REPAID it accordingly. As future BORROWING takes place, the industry will REPAY that as well. Credit unions are participating in this payback. I assure you that based on the amount that St. Louis Community Credit Union has contributed to the cause, it is definitely not a bailout. The credit union cooperative spirit is alive and well.

Does this sound like a bailout to you? Sounds to me like a loan. Sounds to me like a loan that is generating interest income for the US Treasury. Sounds to me like the US Treasury not only didn’t bail credit unions out, they are benefitting from us as an investment. That’s an entirely different game, wouldn’t you agree?

So at the end of the day, it boils down to this: Mr. Stieven wanted to hurl a cheap shot at credit unions because he is a banker, and that’s what some of them do. I remind Mr. Stieven, as I have countless other bankers, if credit unions have such an advantage (because we are not-for-profit financial cooperatives that do not pay federal taxes), then why don’t they (banks) convert their charter to become one of us?

One Response to “If You’re Going To Keep Score, At Least Get It Right!”

  • Mike Beall says:

    As usual, Mr. Adams is correct! Nice piece that helps folks understand that credit unions are not part of the Wall Street crisis.

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